## Facts

- Employers’ Fire Insurance Co. issued a homeowner’s policy to Alfred and Clara Marzocchi providing liability coverage to their minor son, John, and promising to defend suits seeking covered damages, even if allegations were groundless.
- The policy excluded coverage for bodily injury “caused intentionally by or at the direction of the insured.”
- At a Providence elementary school, John struck classmate Chester Beals Jr. in the eye with a lead pencil, allegedly causing permanent loss of vision.
- The insurer filed a declaratory judgment action seeking a ruling that it had no duty to defend or indemnify because the injury was intentional and excluded.
- John’s guardian denied that John intended to injure Chester.
- Chester and his parents later filed a tort suit alleging, in the alternative, that John struck Chester either (1) negligently and carelessly or (2) willfully or maliciously.
- The Superior Court dismissed the insurer’s declaratory action for failure to state a claim, reasoning that it would force advance litigation of issues central to the pending tort case.

## Issues

1. Whether the trial court abused its discretion by dismissing the insurer’s declaratory judgment action where the coverage issue (intentional act) overlapped with issues in the pending tort suit.
2. Whether the insurer had a duty to defend the insured when the tort complaint alleged both negligent and intentional conduct.
3. Whether a conflict of interest required allowing the insured to select independent counsel at the insurer’s expense.

## Decision

- The Rhode Island Supreme Court affirmed dismissal of the declaratory judgment action as a proper exercise of discretion.
- The court held the insurer had a present duty to defend because the tort complaint included negligence allegations potentially within coverage.
- The court held that, due to the insurer-insured conflict over whether the act was intentional or negligent, the insured was entitled to independent counsel with reasonable fees paid by the insurer.

## Legal Principles

- Declaratory relief in insurance disputes is discretionary and may be denied when it would effectively pre-try factual issues that will control liability in a pending tort action, particularly where it would force an injured third party to litigate those issues prematurely.
- An insurer’s duty to defend is determined by the allegations in the complaint, not by the insurer’s view of the facts; if any allegation potentially falls within coverage, the insurer must defend.
- The duty to defend is broader than the duty to indemnify; indemnity may depend on facts found in the tort action.
- When coverage turns on facts intertwined with liability and the insurer’s interests diverge from the insured’s (e.g., intentional-act exclusion), the insured must be permitted independent counsel, with reasonable defense costs borne by the insurer.

## Conclusion

The court refused to allow a coverage declaratory action to serve as an advance trial of whether the insured acted intentionally, held that negligence allegations triggered the insurer’s duty to defend, and required independent counsel at the insurer’s expense because the insurer’s coverage position conflicted with the insured’s defense in the tort suit.


Employers’ Fire Ins. Co. v. Beals, 240 A.2d 397 (R.I. 1968)